An LP cry for help

Responding to administrative burdens, the State of Wisconsin Investment Board is seeking a consultant to help the pension monitor its sprawling private equity portfolio.

It has been said of private equity that it is an asset class that takes up 10 percent of your portfolio and 90 percent of your headaches. Indeed, private equity is a demanding asset class for limited partners. With possibly billions of dollars invested in scores of commitments, many LPs lack the requisite back-office personnel to address the cumbersome administrative tasks of the private equity portfolio.

A recent RFP issued by the State of Wisconsin Investment Board (SWIB) demonstrates the growing need for administrative help on the LP side of the market. “The workload has increased for SWIB’s accounting area, and we are looking to use SWIB resources for more analytical work,” said a SWIB spokesperson.

To ease that accounting burden, SWIB is seeking to hire a consultant to perform private equity monitoring and reporting services for its $67 billion core fund. The pension system has a roughly $8 billion private equity programme spanning 177 partnerships.

The pension already has an investment advisor for private equity – Hamilton Lane. But now it has found the need to supplement that relationship with further administrative help. “The request is for back-office support, which includes duties that are now being shared by both Hamilton Lane. . . and the SWIB staff,” said the SWIB spokesperson. “These services will require cooperation between SWIB’s custodial bank, SWIB staff, as well as the private equity general partners.”

Other LPs with similar bandwidth issues going the same route.

Last year, the San Antonio Fire & Police Pension Fund hired Invient to provide back-office support for its $1.9 billion fund to free up staff time and reduce costs. This support comes on top of traditional manager-selection duties. San Antonio has a 6.4 percent allocation to private equity.

Invient captures the following data: cost and fair market value of active companies, updated quarterly; cost and proceeds of realised companies; corporate actions, mergers, acquisitions, and stock splits; detailed security information; stock sale information; IRRs reported by funds; and fund balance sheets.

Just as GPs have found that they need to think harder about resourcing the management of their firms, LPs will increasingly find that their staff’s time and energy is being sucked into tasks that, possibly, an external firm can better provide.